Social Enterprise

Baroness Smith of Basildon Excerpts

Thursday 6th October 2011 Lords Chamber

[Baroness Smith of Basildon]

My Lords, I have greatly enjoyed this debate. The expertise and support in your Lordships’ House is one which the social enterprise sector will be immensely gratified by. I congratulate my noble friend Lady Andrews on procuring such an important debate, and making such a powerful case. She and others have pressed the Government to match words with deeds. I should declare an interest as a member of the Co-op party, and that I sit as a Labour and Co-op Peer in your Lordships’ House.

No definition is going to be exact, but I always think of social enterprise businesses as those with a heart as well as a head; businesses where profit is measured not just in financial terms, but in how it benefits society. An expression I often use is of businesses that aim for a triple bottom line: that is, good for its business and employees, good for society and good for the environment—in shorthand, perhaps, good for people, profit and the planet.

How that profit is used is absolutely key. Social enterprise’s prime objectives are social and/or environmental. That is not in any way critical of other businesses that have social objectives, but what gives social enterprises their distinctive character is that their social or environmental purpose is their primary purpose, and profits are reinvested in the business. The beginnings of social enterprise can be traced back to the Co-op’s Rochdale Pioneers of the 1840s, which led to other co-operatives and social enterprises being set up in what is now a worldwide ethical movement.

I should confess to your Lordships’ House that my last ministerial position in government was at the Cabinet Office with responsibility for social enterprise, including seeking to establish what was then called the social investment wholesale bank, bringing new finance to social enterprise. Delighted as I was to hold that brief, I never really thought that social enterprise sat well in the Cabinet Office, with what was then the Office of the Third Sector and is now the Office for Civil Society. Social enterprises are businesses—as we have heard, very successful businesses—but with a wider definition of what means success in business.

I was taken by the comments of the noble Baroness, Lady Randerson, about Welsh Water. Indeed, when I was a Northern Ireland Minister, I tried to export the model of Welsh Water to Northern Ireland Water. It has still not resolved the issues there, and it might do well to listen to the comments the noble Baroness made today. Social enterprises are not just about the third sector, and there must continue to be a greater discussion about the role that BIS can play in promoting and supporting social enterprises. I found my meetings with Business Ministers invaluable, and I hope that co-operation is continuing, and expanding.

Although I am consistently impressed by social enterprises, I also get frustrated—that frustration has been illustrated in other comments today—that those in charge of procurement choose not to recognise, or just do not understand, that they could take into account the wider benefits that a social enterprise can bring.

I do not know whether your Lordships are hearing the same “dentists’ drills” as I am and whether their teeth feel as uncomfortable as mine on hearing that sound.

The previous Government set up a Cabinet committee, of which I was a member, with the exciting title of “Miscellaneous 37”, to address some of the issues around procurement. Many of these issues also affect small businesses. As the noble Lord, Lord Haskel, highlighted in his very knowledgeable speech, too often social enterprises have lost contracts to larger businesses which, although delivering on price, may not provide the added value or success of a social enterprise. Those larger businesses then sometimes subcontracted the provision of services to social enterprises. That cannot be right. Often a social enterprise has provided a service at a far lower cost than that for which the original contract was awarded. All we were seeking to do was to ensure a level playing field so that one sector did not have an automatic built-in competitive advantage over another.

This is a difficult area but one in which we were making progress. However, the new Conservative Government—sorry, coalition Government; that was a genuine error—went further. Francis Maude, as the Cabinet Office Minister, said in November 2010 that millions of public sector workers—the noble Lord, Lord Mawson, referred to this—would be given the opportunity of,

“spinning themselves out of the public sector, and taking control of their lives and of the services they provide”.

However, he rather unexpectedly added that this “right to provide” public services would in some cases,

“see services handed to new social enterprises without the need for a competitive tender”.

As an example of extending this brave new world, he cited Central Surrey Health. Other noble Lords have mentioned that. That organisation was set up in 2006 under a Labour Government. Two former directors of the local primary care trust launched a social enterprise with 650 nurses and therapists who each had a £1 not- for-profit share in this new business. They provide services for the PCT. Although it has not been free of criticism, as is the case with all new businesses, it is highly regarded. It is clear that staff motivation and enthusiasm is second to none. Any profit made is reinvested in local services. Francis Maude was enthusiastic, saying, “They are my poster people”. Therefore, your Lordships will understand how expectations in the sector were raised by these comments, especially as regards the tendering process. When so many charities and voluntary organisations were worried about their services in the face of government cuts, many saw this as a potential lifeline. However, when a major new contract came up in the neighbouring area, it was not Surrey Health—the social enterprise “poster people”—but a private company, Assura Medical, 75 per cent owned by Virgin, that won the contract. The noble Lord, Lord Mawson, also referred to that.

I use this example to highlight the great difficulties for social enterprises in bidding for such contracts on a level playing field. Uncertainty was also created for employees leaving the public sector to join a social enterprise. Instead of “not having to tender”, as referred to by Francis Maude, they can later lose the provision and control of that public service to a private company in a way that was never initially intended. We all want to avoid another Southern Cross situation occurring.

The central point is the need to take into account the wider social and environmental benefits as part of the assessment process. Other noble Lords have referred to this as being an important way forward. It is also about improving the capacity to bid, providing support and assisting possible social enterprise consortia, such as was previously done through Futurebuilders. The consensus in your Lordships’ House is that social enterprise is not a political football to speak warm words about and then fail to deliver on when in government.

I was struck by the comments of the noble Lord, Lord Bhattacharyya, on social innovation. It seems to me that it is the crux of the matter. For me the real value of social enterprises, and where they make the most difference and greatest contribution, lies with those which identify a need which is not being met and then devise innovative solutions to meet that need. They also make an enormous contribution to the economy, including employment. We have heard the examples of Sandhurst Community Care and Hackney Community Transport. One of my own favourites is Jamie Oliver’s restaurant Fifteen. This is a restaurant that gets young people, many of whom have convictions, to learn a trade and get their life back on track. Divine Chocolate, led by Sophie Tranchell produces first-rate chocolate and, for the first time, ensured that cocoa farms were not being ripped off. It helped to establish a farmer’s co-operative in Ghana and today almost every chocolate company in the world is looking to be fair trade. Another of my favourite social enterprises is the Elvis & Kresse Organisation, which, seeing how many fire hoses were going into landfill, used that high-quality and very expensive waste for bags, purses and luggage. It then gave 50 per cent of the profit it made to the Fire Fighters Charity.

These examples and others we have heard about are truly inspirational. I also urge the Minister to listen to the social enterprise ambassadors. We have heard about these already from the noble Baroness, Lady Scott. They were introduced by the Labour Government and really impressed me. They are not asking for something for nothing. They are not asking for an unfair advantage but they are asking and seeking to grow the social enterprise sector with the knowledge and experience they have. They need recognition of their work and a level playing field that properly evaluates their worth and their value to society so that they can make their contribution to the economy.

As the noble Baroness, Lady Andrews, made clear, the danger is that we have lost so many of the programmes that support social enterprises; and government announcements are not yet anything more than that. I hope the Minister will be able to positively address the questions of the noble Baroness, Lady Andrews. If the banking crisis and recession has taught us anything it should be about values. The cheapest is not always the best and value for money can be achieved in more ways than one.